For Facebook to lose one payments provider, to paraphrase OscarWilde, is a misfortune; to lose two looks like carelessness. Yet over theweekend Facebook lost four companies who had signed up to its Libracryptocurrency project – with the vast majority in the payments space.
On Friday, they fell like dominoes as Mastercard, Visa,eBay, and Stripe all pulled out. The Financial Times first reported eBay’sexit, while Bloomberg editor Joe Weisenthal first noted the Stripe andMastercard moves.PayPal had pulled out the previous week.
The statements from the companies leaving were relativelyoptimistic. eBay said it ‘highly respected the vision’ of Libra but wanted tofocus on rolling out its managed payments offering. “Stripe is supportive ofprojects that aim to make online commerce more accessible for people around theworld. Libra has this potential,” a Stripe statement added.
The domino effect came about for two primary reasons. Asreported by Ars Technica, the first official meeting of the Libra Associationis scheduled for October 14 where members will be asked to make bindingcommitments to the project. Perhaps more ominously, the US Senate last week sentletters(pdf) to Patrick Collison, Ajaypal Singh Banga and Al Kelly, the CEOs ofStripe, Mastercard and Visa, warning of regulatory action if they proceed withLibra membership. The companies did not reference the letters in their departurestatements.
“Facebook appears to want the benefits of engaging infinancial activities without the responsibility of being regulated as afinancial services company,” the letter read. “Facebook is attempting to accomplishthat objective by shifting the risks and the need to design new complianceregimes on to regulated members of the Libra Association like your companies.
“If you take this on, you can expect a high level ofscrutiny from regulators not only on Libra-related payment activities, but onall payment activities,” it concluded.
From Facebook’s perspective, the company is seeing thedecisions as a temporary blip.
“Special thanks to Visa and Mastercard for sticking it outuntil the 11th hour,” Libra co-investor David Marcus wrote on Twitter. “Thepressure has been intense (understatement), and I respect their decision towait until there’s regulatory clarity for Libra to proceed.
“I would caution against reading the fate of Libra into thisupdate,” Marcus added. “Of course, it’s not great news in the short term, butin a way it’s liberating. Change of this magnitude is hard. You know you’re onto something when so much pressure builds up.”
There are some positives to be taken from this. One paymentprovider remains and is committed to the cause. According to South Africanwebsite TechCentral – albeit two days before the withdrawals – Naspers, of whom Libramember PayU is a subsidiary, the company is ‘still committed to the project.’ “Whatattracted us to it is still valid,” said Naspers CEO Bob van Dijk.
Investment site ZeroHedge was rather more brutal in itsassessment. “The decisions by these anchor companies, whose departure effectivelykills Libra, are a death blow to Facebook’s plans for Libra,” Tyler Durdenwrote in the aftermath of the news. “Without a strong network of financialpartners that could help transfer currencies into Libra and global retailers toaccept it as a form of payment, its reach would be non-existent.”
So what happens from here? One could make an argument thatFacebook hasn’t been given a fair crack of the whip from the critical media. Onthe publication of the Libra whitepaper, for instance, The Atlantic openedwith: “One of the world’s must distrusted companies wants to trust its newLibra cryptocurrency… we shouldn’t.”
Yet good news appears to be in short supply right now – and it will keep going this way until Facebook can provide answers on the transparency and regulatory front. According to the BBC, an upcoming report from the G7 group – whose taskforce included senior officials from central banks and the International Monetary Fund (IMF) – will recommend Libra ‘must not go ahead until [Facebook] proves it is safe and secure.’
